Sri Lanka's rupee rose sharply in early trade on Friday after the central bank slashed commercial banks' net dollar opening positions, but retreated to close at marginally stronger. The rupee touched 119.00 a dollar, a gain of 2.8 percent from Thursday's close of 122.25/40, in early trading after the central bank's order boosted dollar supply in the market.
But by the close, it had retreated to 121.40/70, 0.7 percent firmer on the day but snapping a week-long weakening trend. The central bank, after spending more than $2.7 billion in foreign exchange reserves in the second half of 2011 to fend off depreciation, last month changed its policy of protecting a specific exchange rate. A Reuters monthly forex poll on Wednesday forecast the rupee to fall as far as 128.50 by the end of August. The stock market meanwhile closed down, hindered by as concerns over slowing economic growth, rising interest rates and broadly flat December quarter profits.
The main share index edged down 0.17 percent or 9.49 points to hit 5,460.19. Foreign investors bought shares worth 95.6 million Sri Lanka rupees ($782,300), extending the offshore net foreign inflow to 2.31 billion rupees so far this year, after a net outflow of 19.1 billion last year.